RIL raises $763 mn in block deal, eyeing LyondellBasell buy

Mumbai: Energy major Reliance Industries Ltd raised $763 million on Monday, its third big equity fund raising in under four months, as it readies to buy bankrupt petrochemicals firm LyondellBasell.

Reliance, controlled by India’s richest man, Mukesh Ambani, sold 33 million existing treasury shares at about 5% discount to a clutch of foreign institutional investors, the arranger to the deal said.

The deal follows a $577 million share sale last week to state-run Life Insurance Corp of India and a $660 million share sale by India’s largest listed company in September.

The deals are seen as part of Reliance’s bid to take control of Luxembourg-based LyondellBasell.

Last week, a source told Reuters Reliance had sweetened its offer to buy a controlling stake that valued LyondellBasell at $13.5 billion compared to its earlier bid of $12 billion. But Lyondell’s board had rejected Reliance’s sweetened offer, the Wall Street Journal reported.

“They need the funds for acquisitions - it could be either Lyondell or any other company,” said Prayesh Jain, oil & gas analyst at brokerage India Infoline.

“They do not want to stretch their balance sheet too much... They are obviously thinking of keeping their balance sheet as clean as possible in case they need to raise debt further.”

Reliance has interests in petrochemicals, refining, oil and gas exploration and retail, and a deal with Lyondell would catapult it into the ranks of top petrochemical makers such as Saudi Arabia’s SABIC, Germany’s BASF and US-based Dow Chemical Co.

Acquiring LyondellBasell would also give Reliance a leg up in its efforts to gain greater access to the US and European markets. Its bid comes as petrochemical and refining asset prices have fallen globally in the wake of the financial crisis.

The latest share sale was priced at Rs1,050, or 5% below Reliance’s closing price on Friday.

Shares in the company, valued by the market at $79.3 billion, lost 1 percent at 1,091.55 by 0439 GMT, after sliding as much as 4.8 percent after the block deal.

UBS was the sole arranger for the trade. Its India country head Manisha Girotra told Reuters the share sale would be the last of block trades by the company for a while.

Lyondell filed for bankruptcy protection last January after being unable to meet its debt obligations when demand dropped for petrochemical products during the global economic downturn.

In December, LyondellBasell filed an amended reorganisation plan with a US court, proposing a $2.8 billion rights issue, to simplify its corporate structure and exit bankruptcy protection with significantly less debt.

A court hearing on the amended reorganisation plan will not be held until after a February hearing on the validity of a settlement with a US unit’s creditors.